The concern people have about Social Security is that the money will be "spent" by the government, and that it 'won't be there' for future generations. Rush Limbaugh, for example, describes congressional action as a 'raid' on Social Security; or more directly he asserts that politicians are 'stealing' Social Security money. But he is not alone, just Google "raid on Social Security" and you will find an endless string of Conservatives railing against this 'theft' from America's seniors. Even Democrats participate in this rhetoric, but Conservatives are the source of it.

The bottom line is that everyone is talking about a 'raid' on Social Security, but I am here to say that no one is raiding anything.

THE FALSE PROBLEM WITH SOCIAL SECURITY

These anxieties are based on a misunderstanding of the law as established in 1935, and as amended over the years. The key misunderstanding here is that people believe that Social Security is a great big bank account where the government stores money.

It is not. FICA taxes are collected, benefits are paid. That is all the law establishes. Every year, workers pay in taxes and retirees are paid benefits. And every year until recently, there has been a surplus of taxes collected.

So, what happens to the extra money? Is it stolen?

No.

Since 1935 when the program was established, the law has been as follows:

Section 201(b): It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States.

To put it bluntly, the law MANDATES that the excess money is converted into interest bearing US treasury bonds. The money from those bonds is paid directly into the US treasury, just like any other bond. That money is put into the general fund.

When the money is in the general fund, the government can do two things with it:

it can pay down debt

it can pay for programs

However, because money is a fungible asset (that is, one dollar is the same as another dollar) the distinction as to what we do with 'Social Security' money as opposed to any other money is meaningless. It's just money.

(As a side note, you might ask, why not just keep the money in a great big bank account? Why not change the law? Well, a treasury bond is an interest bearing IOU from our government. But a dollar bill is just a NON-INTEREST BEARING IOU from our government. We could put it in Euros, or in Chinese Yuan, or in ATT Stock, or in Wampum. It wouldn't matter. No matter how you slice it, Social Security 'money' would be in some form of IOU from someone, somewhere. Even if we followed the goldbugs and put it all into bullion, so-called 'real money', that's just an asset whose value is pinned to assumptions and ideas. Everything is an IOU until it is transformed into an asset you need like food or shelter.)

It's better to think of Social Security as two different things:

There are payroll taxes, which are like all of the taxes we collect. This is money going in.

There is the benefit we have established in law. This is an expense.

We are mandated by law to collect the tax. We are mandated by law to pay the benefit. We are also mandated by law to account for the difference between the two by describing that difference as a treasury bond.

But at the end of the day, it's all just a legal contract which the government can modify in different ways to meet specific political needs.

SO, HOW SHOULD WE APPROACH SOCIAL SECURITY?

So, when you approach Social Security you need to be clear about what you actually want to be different. Do you object to the benefit? Do you object to the tax? Or are you worried that the program might be discontinued?

That is, do you object to the program, or do you want to preserve the program?

Debates about government need to first be focused on results. What do we want as a result of government? After that, the debate should focus on achieving that goal in the most efficient, and fairest way possible.

When we argue based on fear and confusion, we get no where.

So, let's go back to the initial premise of this discussion:

People are afraid that Social Security "won't be there" because the government has "raided" the "trust fund".

It would seem that the underlying hope here is that Social Security will remain secure. Beneath that hope, we find a basic assertion:

The Government should provide a minimum retirement amount for workers when they are too old to work.

So, if people are raising the concern described above in an honest way then I think we can conclude that they want to preserve the program. However, if they don't actually want to preserve the program, then raising the above concerns is dishonest and we might conclude that their goal is to just spread confusion and conflict.

IF THE CONCERN IS HONEST

So, first, let's assume that the concern expressed by Limbaugh and others is an honest concern.

Is there anything to worry about?

No and Yes.

On the plus side, Social Security is a wisely constructed government program: it and Medicare are designed with their own separate funding mechanism. In fact, this wise design anticipated exactly the anxiety expressed in the concern. If you made a commitment to pay out welfare to the elderly, but you did not create a dedicated funding mechanism, then you would in fact be setting the country up for disaster. But since 1935, SS has run steady surpluses. Even now, because of the downturn in employment, if SS actually goes into the red, it holds almost 4 trillion dollars in treasury bonds as a backstop. That is about half of the total debt of the US.

You might also worry that the program doesn't work or is mismanaged, but that is also not true. Since 1967 when good statistics on elderly poverty were first captured, the US Poverty rate among people over 65 has declined from 35% in 1967 to 10% in 1995 (if you go here you can see a graph that nicely correlates increases in Social Security spending directly to declines in poverty among the elderly). In fact, approximately half of all people over 65 would, right now, be below the poverty line without their Social Security check. (source)

So, if it is a well-structured and successful program, what is the worry?

Well, it is true that if we have too few workers (like now, because of the recession) or too many retirees all at once (again, now we have a lot of people retiring early due to lack of work, and in the future the Baby Boomers will retire en masse) THEN there will be more money going out as benefits than comes in as pay roll taxes.

But this isn't the fault of greedy politicians. This is an actuarial and a demographic problem. We have too many old people as compared to young workers, and the old people live too long as compared to when the retirement age was set in 1935.

Is this a crisis? Is this the result of evil greed? No. It's just a set of facts created by the unfolding of history.

So, if the concern is honest, what we need to do is pretty obvious:

We need to either reduce the money going out or increase the money coming in. Probably we need to do both. In both cases, the adjustments are small, and our horizon is very far in the future.

And ultimately, these are political questions that don't call into question the basic soundness of the program, or the validity of government action. In fact, Social Security is a huge success, having dramatically reduced poverty over the last century.

Panic and scare mongering are the last thing we need.

IF THE CONCERN IS DISHONEST

So why is there this big hullabaloo? Because people who object to Social Security are pretending to care about its solvency as a way to confuse and anger people. The objective of the "raid" argument is to dismantle the program, discredit government, and spread general cynicism.

The attempt to 'privatize' Social Security made in 2005, and which is at the centerpiece of the current Republican 'shadow budget', is sold as a way to 'save' Social Security but is really just an effort to dismantle it.

Rep. Paul Ryan's (R-WI) budget proposal for this year is aimed at doing just that. And he, more than any one on the Republican party has articulated his intellectual frame for dismantling the system:

"We have an opportunity to make a choice clearly once and for all in the next two elections, and we owe it to the American people to give them a clear choice: Do you want a collectivist welfare state or do you want to get back to being a free market? We need to make a moral, not just practical or statistical, case," he told Reason, a libertarian magazine, in December.

"Rather than depending on government for your retirement and health security, I propose to empower people to become much more self-dependent for such things in life," he said in a speech to the Hudson Institute last June.

This is the real argument here. The 'raid' on Social Security is just rhetoric. The premise of that rhetoric is that most people actually LIKE the program and are worried about having it in their future. And so, conservatives who object to the whole idea of SS perpetrate the fraud dishonestly in an attempt to convince people that the program must be destroyed in order to 'save' it.

At the end of the day, the people offering up the 'raid' argument are really only interested in destroying the program, and by extension, most of the federal government.

"So, what you have to do, is keep faith with the people that are already in the system, that don't have any other options, we have to keep faith with them. But basically what we have to do is wean everybody else off," said Bachmann. "And wean everybody off because we have to take those unfunded net liabilities off our bank sheet, we can't do it. So we just have to be straight with people. So basically, whoever our nominee is, is going to have to have a Glenn Beck chalkboard and explain to everybody this is the way it is."

That's the goal. "Wean" people off the program. Then kill the program.

To summarize: there is no raid on Social Security. Conservatives describe the normal functioning of the law as a 'raid', and then conflate that 'raid' with legitimate but manageable actuarial and demographic trends in order to take general anxiety about SS solvency and turn that anxiety into anger and distrust directed at government.

Let me simplify even further: Conservatives are using a rhetorical trick to take people's worry over the stability of government into anger AT government. This is like taking someone's worry about the health of their mother and turning it into anger AT their mother.

WHAT IS THE ULTIMATE GOAL HERE?

Kill Social Security, Medicare, Medicaid, Unemployment, Welfare, the Dept of Education, Dept of Transportation, Energy, Labor, the Interior . . . Basically the entire federal government except for Defense spending. And if you followed Ron Paul's desire, he'd probably kill that too.

So, this 'raid' rhetoric is the tip of the spear, but the goal of this whole argument is to destroy the government.

SO, WHAT DO WE DO ABOUT SOCIAL SECURITY?

There is a legitimate actuarial and demographic issue with Social Security going forward.

We need more people to work, so we need more jobs and better wages.

We also need to stabilize the whole budget.

Social Security is, at the base, a commitment made in law by the government. The government makes lots of commitments, like keeping roads safe, defending the country from attackers, maintaining a stable money supply, maintaining the rule of law, etc.

If you want SS to be safe, you need to make the government stable and sound.

The best way to do that is pay down the debt and maintain a balanced budget so that, when crisis strikes, we can go into debt to pull ourselves out. We should also spend the money necessary to keep crises at bay for as long as possible.

What this means is that the first goal is psychological: people have to have faith in their government to be balanced and successful in good times so that they can have confidence in their government enough to allow it to go into debt when times are bad.

A government needs to be counter-cyclical: it needs to save when everyone else is spending, and spend when everyone else is saving.

Here is the neat thing about SS: The debt the US owes SS is about 4 trillion, while the debt we owe to the open market is 5 trillion. So a little less than half of the public debt is owed to ourselves (which is mildly comforting). What we need to do is get budgets running surpluses, because the best thing we can do for Social Security is to use surpluses to pay down the external public debt. This would create a virtuous cycle of public confidence and fiscal discipline.

That is, if the balance sheet looks good, the public believes that government can do good. If the public believes the government can do good, the public will allow the government to take prudent action to prevent downturns (like sound regulation, constructive social policy, prudent infrastructure spending). If the government can take prudent steps to prevent downturns, the tax receipts will remain stable, keeping the balance sheet in order, breeding more confidence. Etc.

But if we breed fear instead, and confusion, then confidence plummets and we have the opposite: a vicious cycle. Fear of collapse breeds distrust of government, distrust means that government has to cut when it should spend wisely, cutting leads to further instability in the market, which leads to more pain and fear, and so on.

So what happened, you may ask. Why don't we do that?

Well, we tried. By the late 1990s, as we entered into budget surpluses, the Clinton administration proposed taking Social Security surpluses to pay down the external debt. If we had enacted that proposal and stuck with it, we could have been well on our way to paying off the debt by now.

So why didn't it happen?

Conservative policy group FreedomWorks, among others, lead the charge to stop this change. What rhetoric did they use to stop it? They called it "raiding" Social Security!

Here is what they said at the time:

"Clinton's lock-box plan is nothing more than a scheme to use more than $3 trillion in Social Security surpluses to buy down federal debt. In exchange, the Social Security trust fund gets another $3 trillion worth of IOUs. To be sure, most Americans would rather pay down the debt than use Social Security's surpluses to fund pork barrel projects. But make no mistake, once that money is spent—to buy down debt or fund new programs—it will not be there to cover Social Security's long-term liabilities.

"There is only one place to put the Social Security surplus—in the Personal Retirement Accounts of hard working Americans."

And that is the Big Lie in a nutshell. Tell people that sound fiscal policy is actually theft, and then sell them the idea that Theft (taking away Social Security as a program) is actually sound fiscal policy. People's worry about the health of government is being twisted into a weapon to kill government.